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So, You Think Your Stocks Held for You by Your Brokerage Firm Are Insured. Think Again.

Posted on September 9, 2014

Renowned economics professor Laurence Kotlikoff says SIPC (Securities Investor Protection Corporation) is an insurance scam from Fraud Street. Dr. Kotlikoff contends, “If you look at the history of their response as it’s been discovered, they (SIPC) have been fighting tooth and nail never to pay a dollar. So, the situation is not that we don’t have any insurance for your brokerage account, it’s far worse. . . . There’s a Ponzi scheme discovered every four days, according to a recent New York Times article. So, they can declare a fraud very easily.”

As an example, Dr. Kotlikoff gives someone who lost $2 million and is expecting to get back at least the SIPC insurance claim of $500,000, the maximum payout. Instead of getting money back, SIPC expects money back from you! Dr. Kotlikoff explains, “So, you are at double jeopardy here. It’s not just that you can get totally screwed by a brokerage firm, which is happening every four days because a Ponzi scheme is being discovered, you can also be at great jeopardy by SIPC itself.” Meaning, SIPC cannot only deny your claim, butit can sue you for any profits you made beyond your original investment if there are losses because of a fraudulent brokerage. Dr. Kotlikoff adds, “So, they are running a complete insurance scam. It’s a disgrace. There is a bill in front of Congress that would correct this, but so far, members of Congress have not pushed it through.”

Dr. Kotlikoff goes on to say, “Earning a decent return on your investments is not being a winner; it’s just having a normal economic life. That’s what you are supposed to do. You are supposed to save and invest and enjoy the returns of your investments. So, to be labeled a ‘winner’ and not be labeled a victim, and be told that your remaining balance is totally uninsured, and you have to pay back everything you took out over the last six years is disgraceful. . . . It’s also very, very dangerous. Right now, nobody should have a brokerage account. They should close them immediately and not spend your money for six years. If you spend your money . . . they can sue you for every dollar of return, and that can be far beyond what you put in because of compound interest. This is called a ‘net equity clawback,’and it’s a disgrace.”

Are any brokerages safe? Dr. Kotlikoff says, “You are not safe in any of these companies. . . . You don’t know exactly what they are doing. You don’t know if they are taking your securities and borrowing against them. You may have signed something with fine print that allows them to hypothecate your securities, and then they could borrow money and put on a big bet . . . now, they lost all the money and the brokerage goes under. That could be called a Ponzi scheme . . . anything can be called a Ponzi scheme. Anybody who has a brokerage account should move their money out and contact their member of Congress and get them to pass this bill because it’s not going to be safe for anybody at any point in time to invest in a brokerage account unless this is changed. . . . The bill is called “Restoring Main Street Investor Protection and Confidence Act.” SIPC has been engaged in such fraud that even the Securities and Exchange Commission has sued SIPC to get them to pay off the legitimate claims of the Stanford victims, the second largest Ponzi scheme after Madoff.”

Dr. Kotlikoff goes on to warn of massive and ongoing Wall Street fraud.

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5 thoughts on “So, You Think Your Stocks Held for You by Your Brokerage Firm Are Insured. Think Again.”

After reading this post, I think I have done a huge mistake by depending on my brokerage firm. I am actually not aware about the real scenario that goes behind the screen. The brokerage firm could trade your securities or share it with anyone without any knowledge to you. There was a case in news about Jawad Rathore who was held under charge for sharing and trading securities of a company in the market. All of the money was gone for a while though he was caught but by the time it was too late. I think I should learn from this post.